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M&A Observations: StepStone Solutions Acquires MrTed — Who’s Next

Just in this morning was the announcement that StepStone Solutions is acquiring MrTed in what appears to be a very congenial coming together of two prominent European players in the talent management software market.  In the interests of full disclosure, StepStone is a client with whom I’ve been working actively as this deal was getting finalized.

MrTed has been focused exclusively on talent acquisition, and founder/CEO Jerome Ternynck, a valued colleague, has long championed the position, with which I never agreed, that talent acquisition should be a separate, not integrated talent-related application.  There are some aspects of talent acquisition that do argue for a more external focus and connect points when these applications are viewed narrowly as recruiting.  However, my own view is that there is also a critical internal focus and far too many internal touch points between talent acquisition and the rest of talent management, not to mention between talent acquisition and the system of record, to enable a quite separate talent acquisition solution to be connected properly without a lot of expensive to maintain and quite fragile interfaces. 

From sharing KSAOC profiles of the relevant jobs, positions and work units you’re trying to fill, to sharing the relevant assessment techniques for determining and measuring those KSAOCs as they appear or don’t in external and internal position seekers, to drawing upon the system of record’s organizational structures for knowing who may do what to whom during the talent acquisition processes, the list of shared data and processes is quite long and growing as organizations get serious about integrating their talent management processes for maximum impact on their business outcomes.  While it’s certainly possible to manage talent acquisition as a silo, I have never thought that was a durable or even desireable approach.  One important outcome of this acquisition could be a more integrated set of global talent management capabilities from a financially strong vendor presented to MrTed’s and StepStone’s customers.

MrTed has also been built, from the ground up, to be multi-tenant SaaS from an architectural, deployment and business model perspective.  Such a true SaaS focus and experience base continues to be a rarity in the HCM software industr, in spite of the fact that most of our vendors now claim to be SaaS when they are really hosted, subscribed and largely single tenant.  True SaaS has been a major differentiator for MrTed on several levels, but the firm lacked the scale and resources to leverage fully these assets at a time when scale is critical to maintaining momentum in a very competitive neighborhood. 

These true SaaS capbilities, and MrTed’s very desireable customer base of about 100 large, global enterprises, may well explain StepStone’s interest in MrTed.  It may also explain, when combined with MrTed’s commitment not to stray into the broader talent management space that it claims as its own, why Workday had chosen to partner so publicly with Mr Ted.  One must wonder if Workday will view a partnership with StepStone Solutions as positively, with MrTed now in the hands of a much more broadly focused, globally established and financially robust StepStone.

StepStone Solutions, which also had its origins in talent acquisition, has offered a complete talent management suite for some time but hasn’t been viewed as having the same degree of true SaaS “chops” as some of its competitors.  Furthermore, StepStone hasn’t had the same degree of brand awareness in the US, especially among the larger, more complex organizations which form the bulk of MrTed’s customers.  Where MrTed’s Jerome Ternynck is well-known in HCM industry circles within the US, Matthew Parker, StepStone’s CEO, and his company are much less so, a level of brand awareness we should expect StepStone to raise pretty sharply over the coming months.  And with one of their major European competitors, perhaps their most successful such, now in the StepStone Solutions set,  StepStone now faces a much less challenging European talent management landscape.  It also picks up considerable new competitive strength against it’s US-centric talent management suite competitors as well as the opportunity to sell its broader talent management applications to MrTed’s customers. 

This increase in competitive strength and product offering should also serve them well in the emerging markets, like China and India, which are so important to all of the major talent management vendors.  With the legacy ERP/HRMS vendors delivering ever more talent management functionality and doing so without requiring full suite upgrades in order to consume that newer functionality, the developed economy markets that are saturated with these ERP/HRMS implementations can be a more difficult sell for integrated talent management suites. 

Because I’m under deep NDA as regards StepStone’s product strategy, I’ll defer any comments until released from that NDA.  But true SaaS platforms, like MrTed, are the present of HCM software, and SaaS InFullBloom is the future.  Enough said.

I think this is a very good and strategic acquisition for StepStone Solutions, always assuming that the price is right and that no nasty gremlins are lurking in the acquired assets.  With Jerome staying onboard as an advisor and the reportedly positive reactions of both firms’ employees, there’s a much better than average chance that the combined company will be able to retain both talented workforces and customers, to include those customers running on StepStone’s own talent acquisition solutions even as they see the power of true SaaS in MrTed’s. 

If you’re a current customer of MrTed or StepStone Solutions, you can be pleased that you’ll now be supported by a larger, more powerful vendor with big plans for the future.  If you’re an end-user on the look-out for talent management software, StepStone Solutions becomes a more global, more SaaSy, more US-visible possibility for you.  If you’re a competing vendor that hasn’t achieved sufficient critical mass at a time when $100 million in annual recurring revenue may be table stakes for a talent management suite vendor trying to compete for complex mid-market to global enterprise deals, this new StepStone Solutions is just one more example of your own need to bulk up.  And if you’re an end-user depending on one to many smaller talent management vendors to round out your HCM software platform, you may want to revisit the viability of your smaller vendors in this consolidating landscape.

It wasn’t the first, and this is by no means the last consolidation we’re going to see in the HCM software/services market.  I expect to hear (and not because of any direct knowledge or involvement with them in this area) that Salary.com’s substantial embedded intelligence and quite good talent management applications have found a new home, probably separate from their old Genesys-based, latest possible adopter business.  We’re all waiting to hear what Mr. Icahn has in mind for Lawson.  TriNet has hired a corporate development executive out of their PE firm, General Atlantic, whom we can guess will be on the lookout, among other possibilities, for roll-up opportunities among the PEOs.  And I think that Sonar6 would make an attractive acquisition.  I could speculate further, but I’ll leave that for your comments.

13 comments to M&A Observations: StepStone Solutions Acquires MrTed — Who’s Next

  • […] a good environment for startups,” said Ternynck calmly. But, the entrepreneur explained, he thinks it’s a little more than […]

  • […] a good environment for startups,” said Ternyck calmly. But, the entrepreneur explained, he thinks it’s a little more than […]

  • Thanks for the great analysis Naomi. I think it’s very interesting that HG Capital haven’t owned Stepstone for long.

  • Great analysis – and I love the phrase ‘SaaS chops’!

  • […] M&A Observations: StepStone Solutions Acquires MrTed — Who’s Next – Thoughts on happenings in the talent management software market. […]

  • Thanks for this great analysis Naomi. We’re aiming to share more details of our progress in the coming weeks. In the meantime you may be interested in Matthew Parker’s recent post to our blog: http://budurl.com/MrTed

    Thanks for sharing the good news!

  • Great analysis. Interestingly while most people would agree that an integrated HR platform is what’s in the best interests of an organisation, the vendors that have been most successful recently (TLEO and SFSF), at least in terms of revenue, derive the vast majority of their income from single “modules”. Also we’ve all been expecting the overdue wave of consolidation, it will be interesting to see if this is another false dawn.

  • Jonathan Kidd

    Interesting summary – cheers. I think it’s very interesting that HG Capital haven’t owned Stepstone for long (4 months?) so I’d see this as quite a quick move. I’d be interested in opinions of where this goes next, particularly looking at it from a point of view of the content providers in this space e.g. SHL, PreVisor etc – especially as SHL are also owned by HG Capital. Do you think that others (e.g. Taleo etc) will follow the route of Kenexa and try to build the full service range into their offering or will they remain more focussed on software?

    • Naomi Bloom

      Jonathan,

      Many thanks for your comments.

      I do think that the major future players in talent management software will be integrated SaaS talent management suites which cover all the strategic HRM processes about which I’ve written here http://infullbloom.us/?p=621 and which embed a great deal of intelligence in all its forms, something I’ve written about here http://infullbloom.us/?p=1211 While there will always be specialist HRM software vendors exploiting a niche of functionality, market segment, and/or geography that the bigger players haven’t addressed very well, achieving sustainable scale requires breadth of strategic HRM functionality, broad market segment appeal, and considerable geographic coversage — and that sustainable scale is particularly important as our entire industry moves to SaaS where those with scale have considerably more pricing power than those without.

      With respect to the embedded intelligence, I think it will come from a wide range of IP owners, to include firms like yours, through every type of loose to tight partnership as well as through software vendor direct ownership. For assessments, the integration points are few in number and well-defined, not unlike background checking, and software vendors may choose to partner loosely and widely to ensure great coverage for their many markets. But for many types of embedded intelligence, e.g. KSAOC models with all their arms and legs, there are so many integration points and so much IP required, that I think we’ll be looking at much tighter partnerships, e.g. Mercer with Peopleclick Authoria in Human Capital Connect.

  • […] acquisition, the history of StepStone Solutions, and why StepStone is interested in MrTed.  Naomi Bloom points out some important factors about why recruiting should part of an integrated talent […]

  • […] This post was mentioned on Twitter by Naomi Bloom, Naomi Bloom, Sam Higgins, David Vanheukelom, Montclair Advisors and others. Montclair Advisors said: Congrats Jerome & friends at @MrTed 4 deal w/ another client @Stepstone gd note from @infullbloom http://bit.ly/9NhJDU. #saas #cloud #hcm […]

  • Naomi Bloom

    Bryon, I agree that we’re going to see a number of further consolidation deals in 2010. Some of those deals will be strategic, which I believe this one to be, while others will be more about picking up weakened firms at distressed prices. With the legacy ERP/HRMS vendors investing heavily in talent management add-ons, and making those available, at least in some cases, to one or two generation back primary releases, there will be even more competition for the talent management technology budget. As in so many software categories, there’s rarely durable room for more than a few major players. Fortunately, there’s always plenty of room for innovation at the edges and in areas we’re still defining.

  • Naomi – Great summary and analysis of the transaction. This is one of the more interesting deals in the industry of late and one that I think will ultimately benefit StepStone and Mr. Ted customers. I’ve often declared 2010 as the year of the acquisition (http://thehrtechnologist.com/?p=128), and this deal is just another example of what you, I and others have been saying all along.

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